Reference no: EM133053217
Question -
Part A - Prepare journal entries for the following two transactions:
On 2 July, Cling-on Ltd issued a $12,000, 10%, 3-month note to purchase a vehicle costing $30,000. The remaining amount was paid by cash.
On 31 July, Cling-on Ltd's employees earned wages of $10,000, assuming that these wages earned will be paid on 5 August. PAYG withheld tax was at the amount of $800.
Part B - Ross Ltd and Yang Ltd, two entities of roughly the same size, are both involved in the manufacture of dancing shoes. Each entity depreciates its PPE assets using the straight-line method. An investigation of their financial statements reveals the following information.
|
|
Ross Ltd
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Yang Ltd
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|
Profit
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560,000
|
900,000
|
|
Sales
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10,300,000
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12,600,000
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|
Total assets (average)
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4,480,000
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3,750,000
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|
PPE assets (average)
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3,360,000
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2,000,000
|
|
Accumulated depreciation
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1,420,000
|
937,500
|
|
Depreciation expense
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420,000
|
130,000
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1) For each entity, calculate average age of PPE assets and average useful life.
2) Comment on how to interpret these ratios.
Part C - The following section is taken from Silk Ltd's statement of financial position at 31 December, 2020.
Share capital 5,000,000
Reserves 212,000
Retained earnings 42,000
Silk Ltd's profit for the year ended 31 December 2020 was $60,000
Cash dividends declared for the year ended 31 December 2020 were $31,000
The directors approved a transfer of $20,000 to reserves. This was recorded in the ledger and is the only item affecting reserves during the year.
Required -
1) Journalize the dividends declared.
2) Prepare a statement of the changes in retained earnings as at 31 December 2020.